1. Investment Forum Regulatory Update Round 1 - 2018

2. Learning Objectives
Gain an awareness of how MiFID II has been implemented
Gain an understanding of General Data Protection Regulation (GDPR) and the implications to your firm
Gain an understanding of the Financial Services Compensation Scheme review

3. II

4. What is MiFID business? Shares Futures Options Derivatives
Units in collective investment schemes
Investment trusts
Exchange traded funds

5. What is IDD business? General Insurance Pure Protection
Investment based insurance products
IBIPs include:
Investment Bonds
Protection with an investment element i.e. whole of life, unit linked CIC/IPP
Endowments

6. Application of MiFID II & IDD
Some changes apply to MiFID business
Others apply to both MiFID and IDD
But remember;
Pensions are not covered by either
That is not to say they don’t get caught!

7. MiFID - Conduct of Business Rules
Client categorisation
Complaints
Inducements
Research
Disclosure
Independence
Suitability
Appropriateness
Dealing & managing
Client agreements
Underwriting & placing
Investment research
Product governance
Knowledge & competence
Taping
Supervision
Perimeter guidance
Structured deposits

8. Taping
If you are carrying out MiFID business you must record relevant calls or an ‘at least analogous’ outcome by way of a contemporaneous file note of the conversation A relevant telephone call is the reception of an order This does not apply to IDD business Alternatively, only accept written instructions

9. Suitability
Client must have the ability to bear any losses

10. Suitability Reports
A suitability report needs to be issued when advice is provided
Advice is only where it is a personal recommendation
A personal recommendation is to:
Buy,
Sell, or
Hold

11. SRs – MiFID & IDD products
Reports must be issued before conclusion of the transaction
All other investment business….before conclusion of the contract, unless the necessary information is provided orally, then immediately after the contract is concluded.

12. SRs – MiFID & IDD products
Reports must be issued before conclusion of the transaction
All other investment business….before conclusion of the contract, unless the necessary information is provided orally, then immediately after the contract is concluded.

13. Suitability Reviews
Suitability reviews must be carried out at least annually for MiFID investments
Annually for IBIPs too
But not for pensions!

14. Appropriateness
This does not apply when making a personal recommendation
It applies when arranging a complex MiFID or IDD product without advice i.e.
Execution only services
Direct offer promotions
Automated services

15. What products are non-complex?
Shares – Investment trusts, ETFs
Units – collective investment schemes
Insurance products that are similar to the above i.e. investment bonds, etc
Excludes those products where the underlying structure would be deemed complex

16. Disclosure – MiFID & IDD
MiFID II brought in a new regime for disclosure of costs and charges
All costs and charges have to be aggregated
This is designed to ensure clients understand the purchase cost and on-going cumulative effect on the return
This will also apply to all IDD products

17. Discretionary Portfolio Managers
Where a client’s investment suffers a 10% depreciation they must be notified
Only applies to MiFID investments
Check the agreement and any addendums where you are the client of the DFM

18. Independence
Independence was to consider all retail investment products:
MiFID investments
Insurance based investment products
Other investments – pensions, structured products

19. Independence
A firm must assess a sufficient range of relevant products and:
(1) be sufficiently diverse with regard to their:
(a) type; and
(b) issuers or product providers,
Or;
(2) consider products or a single product line from the whole of market

20. Independent
Always consider cash as an alternative – structured deposits?
Confirm any limitation in the scope of independence
If you are focused independent – do not recommend a product that does not meet the client’s objective

21. MiFID - Conduct of Business Rules
Client categorisation
Complaints
Inducements
Research
Disclosure
Independence
Suitability
Appropriateness
Dealing & managing
Client agreements
Underwriting & placing
Investment research
Product governance
Knowledge & competence
Taping
Supervision
Perimeter guidance
Structured deposits

22. Training & Competence
Anyone involved in IBIPs and/or protection sales must carry out 15 hours of CPD activity per year
For investment advisers this is included within the 35 hours

24. SimplyBiz Support

25. General Data Protection Regulation (GDPR)

26. What is the General Data Protection Regulation (GDPR)?
Harmonised law across EU Member States
Becomes enforceable on 25 May 2018
Now is the time to start preparing

27. What are the key points? Basic architecture is unchanged
New accountability requirement
New rights for individuals, and strengthening of existing rights
Your clients will be known as ‘data subjects’

28. Data Subjects – Enhanced Rights
Data subjects can elect to have data processed for restricted purposes only
Right to data portability, to have data transferred to a new data controller
The right to charge a fee for copied data has been removed unless it is excessive/repetitive
Right to be ‘forgotten’ or erasing of data

29. GDPR throughout the sales process
Initial meeting
Fair Processing Notices (Privacy Notice)
Information sets out and includes;
the identity of your firm
the purposes for which information will be processed
how long the data will be stored
a description of how this information will be disclosed to third parties

30. GDPR throughout the sales process
Initial meeting
Client consents to the processing of their personal data
Consent must be clear and affirmative
Consent for multiple purposes must be given individually
The client has the right to withdraw consent at any time

31. GDPR throughout the sales process
Processing business
All 3rd parties you deal with need to be GDPR compliant
How do you evidence this?
Your consent will allow processing of information between all relevant parties but not marketing

32. GDPR throughout the sales process
Storing of data - Computer
Allocate staff unique passwords
Change passwords on a regular basis
Encrypt back-up data which is removed from the office

33. GDPR throughout the sales process
Paper based storage
Building premises are alarmed & all windows have locks / shutters
Advise staff to have a clear desk policy
Ensure filing cabinets are locked when premises are unattended
Dispose of confidential paper waste securely by shredding

34. GDPR throughout the sales process
Identity of customers
Ensure customers are identified prior to personal information being discussed
Check name, date of birth, postcode, etc

35. GDPR throughout the sales process
Clients can request a copy of their data. This is a Subject Access Request
Previously you had 40 days and could charge £10.00
Now it is free and must be sent in one month
Always identify the person making the access request is legally entitled to the data

36. GDPR throughout the sales process
The right to erasure is a fundamental part of GDPR
A client can request that they are deleted from your records
You can retain the data where the data is required to comply with legal requirements or it maybe required to defend a future legal claim

37. The GDPR Hub

38. The GDPR Hub

39. The GDPR Hub Awareness Awareness needed at principal level
Awareness needed at all staff level
Overviews & guidance
Gap analysis
Training

41. FSCS Funding Proposals
Set up a trust to hold additional capital requirements
Set up a surety bond for initial capital
Align pension funds in drawdown to insurance based annuities
Implement a 75/25 – intermediary/provider funding model

42. Looking Ahead to the LDEs
Senior Managers and Certification Regime
Pension transfer final rules
GDPR
FAMR

43. ANY QUESTIONS?